Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
NSW gets its funds together
(Pictured: Michael Cole)
After years of discussions, both formal and informal, the big three NSW Government funds have agreed to a three-way merger to create a $60 billion fiduciary fund for super and insurance. Michael Cole, the well-regarded former fund manager and business man, will be its chairman.
NSW State Super (SAS Trustee Corporation – known as ‘STC’) which has about $38 billion in assets, will merge with NSW Treasury Corporation (TCorp), which has about $14 billion, and the old NSW Work Cover, with about $8 billion, (now called Safety, Return to Work and Support Division).
Unlike the other states, particularly Victoria and Queensland, NSW has already cashed in on its super fund management, through the sale of what was known as Axiom, in the 1990s. Axiom was the inhouse investment management arm of STC. The NSW Government has retained the administration company, Pillar, but will presumably sell this at some point too. Victoria has retained VFMC and Queensland has retained QIC.
The boards of the three NSW funds will remain separate but the managements will be merged. Who gets what position at the fund will be decided over the next six months. Each fund has a team of experienced investment professionals and administrators.
Also, we don’t know yet what the new fund will be called. The NSW Government does not have a great track record with naming super funds (e.g SAS Trustee Corporation, NSW Treasury Corporation, etc.). Perhaps we can make some suggestions?
Last week’s announcement was: “NSW Treasurer Mike Baird and Minister for Finance and Services Andrew Constance today [March 11] announced the Government will amalgamate the funds management activities of State financial assets worth A$65 billion within NSW Treasury Corporation (TCorp), creating a top-10 Australian investment manager.
“Today’s decision builds on 12 months of collaboration between Safety, Return to Work and Support Division (SRWSD), SAS Trustee Corporation (STC) and NSW Treasury Corporation (TCorp), the State’s three largest managers of financial assets.
“Responsibility for the investment objectives, risk management and asset allocation of the funds controlled by SRWSD, STC and TCorp will remain with each of the separate entities and their respective Boards.
“Amalgamated functions within the three entities will include appointment of investment managers, due diligence, funds administration and operations, and reporting.
“Today’s announcement provides a great opportunity for NSW to harmonise its funds management arrangements, by leveraging the substantial capabilities that exist across the three agencies,” said Mr Baird.
“It enables the pooling of investment management expertise and intellectual property within an integrated platform, and will make it easier to retain, develop and attract high quality investment professionals.”
“The streamlined approach is expected to deliver long-term financial and non-financial benefits to the three entities’ stakeholders via increased scale and a common administration platform, while delivering a “whole of portfolio” view of the financial assets managed by TCorp, SRWSD and STC for the State.
As TCorp currently manages funds for a range of NSW Government agencies, legislation is not required to implement the decision.
“Mr Constance said, “This initiative is formed around a collaborative desire to leverage our scale and expertise in order to deliver improved funds management for our stakeholders.”
“These are common-sense changes designed to eliminate unnecessary duplication of activities.
“The Government also announced the appointment of Mr Michael Cole as an independent expert to oversee the amalgamation.”
Cole worked at BT Funds Management for 17 years, including heading up the fixed interest division, finishing up in 1997. He is the chair of Platinum Asset Management and a director and shareholder of systems company OneVue.
